USD/CAD forecast: Week of 5th – 9th June, BoC preview

on Jun 3, 2023
  • The USD/CAD pair has retreated in the past few weeks.
  • The Bank of Canada will conclude its meeting on Wednesday.
  • Canada will publish the latest jobs numbers on Thursday

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The USD/CAD pair retreated on Friday after the strong US non-farm payrolls (NFP) data. It dropped from this week’s peak of 1.3650 to a low of 1.3400 and now sits at the lowest level since May 16. Focus now shifts to the upcoming Bank of Canada (BoC) decision and Canada’s jobs numbers.

BoC interest rate decision

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The biggest forex news this week was the decision by US Congress to pass the debt ceiling bill, which I wrote about here. By doing that, it ensured that the US will not have an unprecedented default. But it also means that the American government will boost its public debt by over $4 trillion in the next two years.

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The other important news was a statement by the new Fed Vice Chair that he supported a pause of rate hike in its June meeting. He argued that a pause was necessary to ensure that the bank observes the impact of the recent hikes.

And on Friday, the US published relatively strong jobs numbers. The economy added over 339k jobs in May while wage growth continued. These numbers, coupled with the strong PCE data released a week earlier, mean that some Fed members will support another hike.

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Looking ahead, in the coming week, focus will be on the Canadian dollar. The biggest CAD news will be the latest interest rate decision by the Bank of Canada (BoC) scheduled on Wednesday. Economists expect that the bank will decide to leave rates unchanged since inflation appears to be falling. A surprise rate hike will be bullish for the loonie.

The other crucial news to watch will be the OPEC+ meeting in which the members will deliberate on supply cuts. This meeting will be important since some analysts believe that Brent could plunge to $60 in the near term. Canada will then publish the latest jobs numbers on Friday.

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USD/CAD technical analysis

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The 4H chart shows that the USD to CAD exchange rate formed a major top at 1.3650. It has failed to move above this level several times since April this year. It has crossed the 50-period moving average in a bearish way while the MACD and the Relative Strength Index (RSI) have drifted downwards. It is also slightly above the ascending green trendline.

Therefore, the outlook for the pair is neutral. A break below the ascending trendline will lead to more downside, with the next support level to watch being at 1.3315. On the other hand, a bullish breakout will only be confirmed if it moves above 1.3650.

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